Focuslight Technologies Inc (SHSE:688167) Not Lagging Industry On Growth Or Pricing

With a price-to-sales (or "P/S") ratio of 8.1x Focuslight Technologies Inc (SHSE:688167) may be sending bearish signals at the moment, given that almost half of all Semiconductor companies in China have P/S ratios under 6.2x and even P/S lower than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Focuslight Technologies

What Does Focuslight Technologies' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Focuslight Technologies has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Focuslight Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Focuslight Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Focuslight Technologies would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. Pleasingly, revenue has also lifted 45% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 55% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 36% growth forecast for the broader industry.

In light of this, it's understandable that Focuslight Technologies' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Focuslight Technologies' P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Focuslight Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Focuslight Technologies that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.